No man’s rally

ABERDEEN, SCOTLAND – Well I must say, the timing of my note on Monday (Party at the frontier) wasn’t the best.

My prediction that we were about to experience an alt-season, where bitcoin will take a step back and other cryptocurrencies will come into their own, was confounded just hours later. The announcement that Elon Musk’s Tesla ($TSLA) had bought $1.5 billion worth of bitcoin in January caused an incredible surge in the BTC price. If I’m not mistaken, that marks the biggest daily increase in the BTC price on record – up $8k in a single day (or more depending on which exchange you use).

I suspect the extreme nature of that surge is due to the lack of available bitcoin on crypto exchanges, caused by long-term investors withdrawing their BTC for safekeeping – a dynamic we explored in The Big Suck (26 January).

But while BTC did reaffirm its status as king of the crypto space, I do still believe alt-season is here. Indeed, in the face of the BTC rally, Ethereum (which I use as a proxy for the altcoin space) rallied to a new all-time high of its own. But we’ve certainly not yet at the point where bitcoin falling causes altcoins to fly – a dynamic we saw in 2017 and which I believe we’ll see again.

Things aren’t quite the same now as they were in 2017 however…

Trend setter shunner

Regular readers will be familiar with my interest in Google Trends to gauge interest in bitcoin, as so much investment into the space in previous years has come from the everyman.

The last time we checked up on this, searches for the word “bitcoin” were just beginning to surge (Dark horse in limelight – 5 January).

But now… It looks like interest has already peaked:

Worldwide Google search popularity for the term “bitcoin” (indexed, so 100 = most searches)
Source: Google Trends

This is very intriguing as back in 2017, the BTC price peaked at the same time Google searches did. For the BTC price to be breaking new all-time highs while Google search interest is declining suggests that this rally is an altogether different beast. The price may be booming, but not nearly so loudly as it did back then – there’s a silencer attached.

If we look at search popularity for the term “buy bitcoin”, the result is even more extreme, and further suggests that it’s not the everyman powering this rally:

Worldwide Google search popularity for the term “buy bitcoin” (indexed, so 100 = most searches)
Source: Google Trends

What makes this rally different from 2017 is the presence of institutions buying bitcoin. This is not a grassroots “retail mania” – members of the financial establishment are now in the space, and have driven at least some of the action.

When we look at search popularity for Ethereum however – which again I’m using as a proxy for the altcoin space – something interesting occurs.

While “buy ethereum” is dead in the water, like “buy bitcoin”…

Worldwide Google search popularity for the term “buy ethereum” (indexed, so 100 = most searches)
Source: Google Trends

the word “ethereum” on its own has reached record search popularity this year, and remains higher now than it was at any time in 2017:

Worldwide Google search popularity for the term “ethereum” (indexed, so 100 = most searches)
Source: Google Trends

What’s driving all the interest in ETH?

With the BTC price already very high on the back of the bull market driven by institutions, could this be an indication that the everyman is now reaching for cheap leveraged exposure, like buying silver in a gold bull market? That would be my bet – and furthers my conviction that alt-season is here.

But then why are there so few searches for “buy ethereum”? Well, the “buy” prefix in Google searches could be a red herring. Crypto has been present in the public consciousness for quite a few years now, and crypto exchanges have run plenty of ad campaigns – perhaps everyone already knows where and how to buy these assets.

If the everyman is buying ethereum now that institutions have begun buying bitcoin… maybe in the next crypto cycle (for believe me, there will be an end to this bull run) institutions will start buying ethereum – and then the everyman will need to reach for something else…

Until next time,

Boaz Shoshan
Editor, Capital & Conflict

PS In these truly extraordinary market times, you need to keep a steady hand at the wheel. But even more importantly, you need to know where the market’s taking you – and this Money Map will show you exactly where it’s heading.

Category: Investing in Bitcoin

From time to time we may tell you about regulated products issued by Southbank Investment Research Limited. With these products your capital is at risk. You can lose some or all of your investment, so never risk more than you can afford to lose. Seek independent advice if you are unsure of the suitability of any investment. Southbank Investment Research Limited is authorised and regulated by the Financial Conduct Authority. FCA No 706697.

© 2021 Southbank Investment Research Ltd. Registered in England and Wales No 9539630. VAT No GB629 7287 94.
Registered Office: 2nd Floor, Crowne House, 56-58 Southwark Street, London, SE1 1UN.

Terms and conditions | Privacy Policy | Cookie Policy | FAQ | Contact Us | Top ↑